Tuesday, September 19, 2017

Maryland Joins FirstNet and AT&T for Public Safety Network

On September 18, 2017, Maryland Governor Larry Hogan announced that the state will partner with FirstNet and AT&T to deliver a wireless broadband network to Maryland's public safety community, creating faster, more informed and better coordinated responses.  During the announcement Governor Hogan said: 

Keeping Marylanders safe is our top priority, and our first responders need to be equipped with every tool possible to protect our citizens. By adopting this plan, our first responders will now have the ability to efficiently and effectively work together not just within the state, but across the region and at the national level. This innovative initiative will also spur investment into Maryland's economy, helping to create jobs and enhance mobile broadband coverage in rural parts of the state.

This partnership will transform the way Maryland's fire, police, emergency medical services, and other public safety personnel communicate and share information. The enhanced wireless broadband coverage will reduce response times, mitigate damage, and save lives.

Chairman Pai: Additional Spectrum Will Enable Quicker Disaster Response Efforts

Last week, FCC Chairman Ajit Pai issued a keynote address at the first-ever Mobile World Congress Americans in San Francisco. Chairman Pai discussed the important role the FCC plays in disaster response efforts, specifically monitoring the status of communications networks in affected areas. Chairman Pai said that the damage caused by Hurricanes Harvey and Irma "would have been a lot worse if it weren't for wireless communications."

Although wireless communications networks during these two hurricanes were much more resilient than in some previous disasters, Chairman Pai says that unleashing licensed and unlicensed spectrum across low-, mid-, and high-bands will enable first responders to quickly assist with recovery and restoration efforts. Additional spectrum will help deploy 5G wireless technology which will create three million jobs and $500 in economic activity. But most importantly, when horrible disasters occur, 5G technology and robust wireless networks will enable communication between first responders and affected residents.

Thank you to the brave first responders during these disasters!

Monday, September 18, 2017

A Natural Rights Perspective of the Constitution

Yesterday, September 17, 2017, was Constitution Day, commemorating the 230th anniversary of the formation and signing of the U.S. Constitution. For a good source of information regarding the natural rights perspective that influenced the Founding Fathers during the formation of the Constitution, please read "The Constitutional Foundations of Intellectual Property: A Natural Rights Perspective" by Free State Foundation President Randolph May and Senior Fellow Seth Cooper.

Friday, September 15, 2017

A Day to Remember Our Constitution's Protections for IP Rights

On Constitution Day – September 17 – we celebrate the framers signing of America’s written fundamental law. Among its sections and clauses, the Constitution’s provision for intellectual property (IP) rights deserves renewed appreciation by the public and support by Congress. Stronger security for IP rights enhances our economic climate and fulfills an important constitutional obligation.
Copyrighted works and patented inventions increasingly are vital to our nation’s prosperity in today’s digital Internet-connected global economy. A report by the U.S. Department of Commerce found that value added to our economy by copyright- and patent-intensive industries totaled approximately $1.8 trillion in 2014, amounting to about 10.6% of the U.S. gross domestic product. Also, jobs supplied by copyright-intensive industries totaled 5.6 million in 2014, while patent-intensive industries provided 3.9 million jobs.
The vibrant growth in IP’s value to our economy has been driven by digital technology and Internet connectivity. However, modern means of production and distribution also render IP vulnerable to online theft and infringement. Although often overlooked, the Constitution entrusts Congress with the responsibility to meet such challenges and ensure the security of copyrights and patent rights. The conceptual and historical backdrop of that responsibility are examined in the book, The Constitutional Foundations of Intellectual Property: A Natural Rights Perspective, that I co-authored with Free State Foundation President Randolph May.

Logically, IP rights reflect the natural rights principle that a person has a right to the proceeds of his or her own labors. Those proceeds are a person’s private property, deserving protection by equal laws. Historically, this natural rights and property rights understanding of copyrights and patents prevailed in the newly independent American states. By the time the framers met for the Philadelphia Constitutional Convention in 1787, twelve of the thirteen former colonies had adopted state copyright laws, and a few provided patent protections for inventors.
James Madison concluded that the lack of uniformity of among state copyright laws was a vice that needed to be remedied. Other framers in Philadelphia agreed. The Constitution’s Article I, Section 8, Clause 8 — the intellectual property (IP) clause — grants Congress the power “to promote the Progress of Science and Useful arts, by securing, for limited Times, to Authors and Inventors, the exclusive Right to their respective Writings and Discoveries.” As Madison observed in Federalist No. 43, conferring on Congress the power to protect copyrights and patent rights would be highly useful to individual authors and inventors and also serve the public good.

The First Congress to convene under the Constitution promptly exercised its constitutional power to secure copyrights and patent rights. In addition to establishing a system of taxes and revenues, setting up the federal judiciary, selecting the permanent capital site, and drafting the Bill of Rights, the First Congress passed the Copyright and Patent Acts of 1790. Both acts were signed by President George Washington. Those landmark laws set IP on a free market footing by expressly recognizing authors’ and inventors’ exclusive rights to contract for the sale or licensed use of their writings and inventions. The Copyright and Patent Acts of 1790 also provided civil rights of action for creators and inventors whose protected works or inventions were infringed.

In the nearly two hundred fifty years that have followed, Congress has intermittently exercised its constitutional power to further secure IP rights. Drawing upon natural rights and property rights principles, statesmen such as Daniel Webster and Henry Clay helped pass the first substantial revisions of the Copyright and Patent Acts in the 1830s. Also cognizant of natural rights and property rights principles, in 1891 the Centennial Congress secured copyright protection for foreign authors in order to ensure American authors were treated equitably overseas. In 1897, Congress made willful infringement of certain copyrighted works a crime subject to federal prosecution. And through subsequent legislation by Congress, the scope of copyright protections has expanded beyond books and engravings to include unauthorized reproductions or public performances of motion pictures and digital sound recordings. Likewise, the scope of patent protections now includes inventive designs as well as manufacturing and other production processes that embody the latest digital technologies.
Bearing those constitutional, historical, and economic considerations in mind, there is work ahead for Congress that is essential to securing American IP rights in the Digital Age:

  • The Copyright Office’s capabilities are outdated. Only limited online searching for copyright registration records is available and online searching for recorded copyright title transfer is unavailable. Congress should pass legislation to modernize and restructure the Copyright Office. It should give the Register of Copyrights the independence necessary to make technology upgrades and to establish a comprehensive searchable online database of copyright records. Upgrading the Office’s capabilities will reduce parties’ compliance costs and enhance the economic value of copyrighted works.
  • Steep losses to the U.S. economy caused by overseas piracy of IP need to be curtailed. A 2017 report by the bipartisan IP Commission calculated that counterfeit goods, pirated software, and trade secret theft cost our economy between $225 and $600 billion annually. Congress should urge the Trump Administration to include strong IP rights enforcement provisions in foreign trade negotiations, and proposed treaties that contain such provisions should be ratified and supported by implementing legislation.

As we reflect on our Constitution’s origin as well as its guarantees for representative government and individual freedoms, we should not forget the wisdom of the framers in including the protection of copyrights and patent rights in our nation’s fundamental law. Congress should vigorously pursue its constitutional responsibility to secure IP rights and put our nation’s economy on the strongest possible footing for the Digital Age.

Thursday, September 14, 2017

FTC Acting Chairman: Current Antitrust Framework Is Sufficient for Technology Sector

In a September 12, 2017 speech at the Global Antitrust Enforcement Symposium at Georgetown University, Acting Chairman Maureen Ohlhausen of the Federal Trade Commission addressed the proper role of antitrust enforcement in an increasingly digital world.

Acting Chairman Ohlhausen noted the problems with increasing reliance on regulators to control the development of competition in digital markets:

If you want to put your faith in the hands of the regulators, think about some of the subsidiary questions you are actually asking the government to decide. Can these technology firms branch out into new markets, or must they narrowly focus on their original, core competency? When a technology company lowers prices, should that be permitted by regulators because it helps consumers or prohibited because it makes some other business less likely to succeed? How should a regulator weigh these effects against each other?

She concluded:

Although the analysis in the technology sector may be different from other industries, I believe the current framework is sufficiently flexible to address these important issues, but we should continue to refine our understanding on future competitive conditions.

FCC Should Complete CenturyLink-Level 3 Merger Review Soon

On December 21, 2016, the FCC issued a Public Notice  announcing that applications had been filed for the “transfer of control of Level 3 Communications, Inc. to CenturyLink, Inc.” Nearly nine months later, the FCC still has not made a decision on the potential merger despite the pro-competitive public benefits the transaction would create. The FCC should make a decision very soon.
On June 9, 2017, the FCC paused the 180-day shot clock at 170 days because it said additional data was needed to supplement the applications. Although the FCC may have had good reason to pause the shot clock, the FCC often takes more than 180 days to review transaction requests. In March 2017, Free State Foundation President Randolph May published a Perspectives from FSF Scholars entitled “A Proposal for Improving the FCC’s Merger Review Process.” In this proposal, he urges the FCC to improve the timeliness of its decisions and to refrain from imposing extraneous conditions when reviewing mergers. In some instances, the reason the FCC fails to meet its 180-day deadline is because it spends time considering the imposition of extraneous merger conditions, which, in effect, are company-specific regulations.
Currently, twenty states have approved the potential CenturyLink-Level 3 merger, and it’s possible the remaining states could be waiting on the FCC to make a decision. (See this March 2017 blog by Seth Cooper questioning whether, in any event, state regulators should be conducting duplicative merger reviews.) CenturyLink originally stated that the merger should be complete by September 30, but it recently revised that time frame to October 12, 2017, according to TRDaily (September 12, 2017). This goal is certainly in reach because on September 8, 2017, CenturyLink filed an ex parte with the Commission saying it will complete the submission of supplemental data “shortly.” Upon this submission by CenturyLink, the FCC should aim to complete its merger review promptly.
Most importantly, if approved, this merger would provide consumers with benefits in the markets of broadband, video, and business data services. In January 2017, Free State Foundation Senior Fellow Seth Cooper authored a Perspectives from FSF Scholars entitled “CenturyLink-Level 3 Merger Should Bring Pro-Competitive Public Benefits.” He explained how “any conceivable harm from the proposed merger appears less likely and less substantial than the likely benefits.” And he explained that the merger would not harm competition in the video or broadband markets:
Importantly, CenturyLink/Level 3 raises no vertical integration concerns related to the residential broadband or video services markets. Unlike CenturyLink, which serves 6 million residential broadband customers, Level 3 is not a residential broadband Internet service provider (ISP). Also, whereas CenturyLink serves about 318,000 residences with its PrismTV multi-channel video programming service and also plans to roll out an over-the-top skinny-bundle video offering, Level 3 is not a video service provider. The merger would nowhere reduce the number of ISPs or video service providers serving residential customers.
Additionally, the combined CenturyLink/Level 3 would enhance competition in the market for business data services. As Seth Cooper explains, the potential merger would create cost savings by reducing the number of business arrangements needed to effectively serve multi-location customers, and it would increase the direct knowledge of business data network functions, “enabling swifter response to network malfunctions and ensuring quality of service guarantees are satisfied.” Therefore, the sooner the FCC realizes the pro-competitive benefits of this merger, the sooner these two companies can combine their resources to better serve consumers with enhanced offerings and lower prices.

Because this potential merger would have no negative impact on competition, the FCC should not need 180 days to determine that the merger would be beneficial to consumers. And, in general, the FCC should be able to make timely merger decisions. One way to do that is to refrain from imposing unnecessary merger conditions.

Tuesday, September 12, 2017

US Trade Rep Investigating China’s IP Practices

On August 14, President Trump issued a memorandum instructing the United States Trade Representative to consider investigating China’s policies and practices relating to IP theft and forced technology transfers. U.S. Trade Representative Robert Lighthizer promptly opened its investigation pursuant to the Trade Act of 1974. Its notice of the initiation of the investigation of China’s practices relating to IP has now been published in the Federal Register.
Among those applauding the opening of the investigation was is the bipartisan IP Commission, which issued a 2017 report update that spotlighted $225 billion in annual costs to the American economy from international IP theft. Concerns about IP theft in China were of FSF Research Associate Michael J. Horney discussed that update in his blog post: “New IP Commission Report Shows Need for Strong IP Enforcement Efforts.”
In the Digital Age, combating international theft and piracy of American intellectual property (IP) has become increasingly important to enhancing our nation’s economic prosperity. Securing American IP rights abroad is also a constitutional imperative. FSF President Randolph J. May and I explore the philosophical and historical aspects of that imperative in our Perspectives from FSF Scholars paper “The Logic of International Intellectual Property Protection.”

Opposing Cost-Benefit Analysis Raises a Red Flag

In its Notice of Proposed Rulemaking (NPRM) for the Federal Communication Commission’s Restoring Internet Freedom proceeding, Chairman Ajit Pai proposes that the Commission perform a cost-benefit analysis (CBA) of the FCC’s Title II regulation of Internet service providers. Free State Foundation scholars endorsed the FCC’s proposal in their filed comments as a welcome development for improving the quality of economic analysis at the FCC. However, in the initial round of comments, some pro-regulatory organizations were skeptical of the FCC’s proposal for performing a CBA. Notably, the comments from these groups appear to have been intended to discourage the FCC from performing any cost-benefit analysis.
Requiring regulatory agencies to conduct CBAs has a history of bipartisan support. A 1993 executive order issued by President Clinton and followed by every administration since requires that executive branch agencies perform CBAs before implementing economically significant regulations. The FCC is not required to perform CBAs because it is an independent agency. However, other independent agencies, including the Federal Trade Commission and the Securities and Exchange Commission, have adopted internal rules requiring CBAs to help inform their regulatory decisions.
There should be little support for a regulation when its costs outweigh its benefits because adoption of that regulation will usually slow economic activity, destroy jobs, and often harm the parties the regulation is claimed to help. Cost-benefit analysis is an important tool that helps regulatory agencies evaluate in a systematic way whether a course of action is worth pursuing. Shortly before joining the FCC as Chief Economist, Jerry Ellig documented how the quality of SEC rulemaking improved after the agency, in the middle of the Obama Administration, adopted a requirement for conducting cost-benefit analyses.
Performing a cost-benefit analysis of a regulation requires an agency to address several important questions that it might otherwise fail to consider. Does the regulation address a market failure or systemic problem? If it does, how does it correct the perceived market failure? Are there other less intrusive regulatory approaches that would solve this market failure? And finally, do the benefits of the regulatory solution outweigh the costs of imposing new regulatory requirements? Needless to say, the FCC did not ask these important questions when it adopted the Open Internet Order in February 2015, but Chairman Pai is proposing that the Commission perform a CBA before repealing Title II regulation. Regrettably, some groups that support Title II regulation are skeptical.
In the initial round of comments of the Restoring Internet Freedom proceeding, Free Press and INCOMPAS criticized the NRPM for a lack of guidance for how the CBA should be conducted. But as we responded in our reply comments, “paragraph 106 of the Notice is clear in proposing that the FCC follow the same guidance in Section E of OMB Circular A-4, which has been used by executive branch agencies since 2003, while inviting comments on whether that is appropriate or whether the Commission should modify its approach.” Moreover, we added:
Also significant is the fact that neither INCOMPAS nor Free Press provide any guidance whatsoever to the FCC on how to better perform a cost-benefit analysis. Thus, their comments can only be interpreted as opposing the Commission performing any cost-benefit analysis at all. The FCC should not be an “economics-free zone.” Instead the Commission should improve its use of economic analyses, including cost-benefit analysis, so that it can make better regulatory decisions.
Free State Foundation Senior Fellow Theodore Bolema published a July 2017 Perspectives from FSF Scholars entitled “An Assessment of the FCC’s Proposal to Conduct a Cost-Benefit Analysis,” which was attached to FSF’s initial comments as Appendix A. In that paper, Dr. Bolema addresses the important questions pertaining to a cost-benefit analysis of the FCC’s Open Internet Order.
Does the regulation address a market failure or systemic problem? If it does, how does it correct the perceived market failure? Dr. Bolema says:
Significantly, the Open Internet Order regulations can only pass a cost-benefit test if they are addressing a clear market failure than can only be resolved by the FCC regulation. If there is no market failure or other systemic problem, then government action will likely do more harm than good. The FCC justified the 2015 Open Internet Order in large part on conjectured harms that might occur in the future, but had not occurred to date under regulatory oversight that was considerably less heavy-handed.
Given the remarkable record of innovation, investment, and choice of new services offered to customers before the Open Internet Order regulation was imposed, it is highly unlikely that any such market failure can be found.
Are there other less intrusive regulatory approaches that would solve this market failure? Dr. Bolema contends:
If the FCC does identify a market failure, perhaps based on market power for some parties in some places at some times, then it must also consider whether less intrusive alternative approaches are sufficient to address the market failure before resorting to public utility regulation of a broadband market segment. These alternative approaches include increased antitrust enforcement, new consumer protection regulations, or minimum quality standards.
OMB Circular A-4 requires that executive branch agencies consider less intrusive regulatory approaches as part of their cost-benefit analysis. Even if the FCC concludes that a market failure exists in its baseline scenario, that does not mean that the only alternative is the full Title II regulation imposed by the Open Internet Order. Instead, the FCC must then consider other case-by-case regulatory approaches that are different from the pre-2015 regulatory environment.
Ted Bolema’s Perspectives also considers some of the regulatory uncertainty and costs imposed by the Open Internet Order, specifically opportunity costs. For example, Free Press claims in its comments that broadband investment has increased since the Open Internet Order, despite convincing evidence discussed in our initial comments and reply comments that investment has declined. But even assuming, hypothetically, that investment has increased, the relevant question is did it increase less than it otherwise would have absent the regulation? This is the premise of my May 2017 analysis which ultimately finds that broadband investment declined by $5.6 billion since the Open Internet Order was adopted.
Dr. Bolema performed an additional cost calculation in his Perspectives, following the methodology the FCC proposed in its NPRM:
Applying this multiplier to the Free State Foundation estimate by Michael Horney of a $5.6 billion reduction in broadband investment over 2015 and 2016 produces an estimate of $7.0 and $9.8 billion in lost economic activity attributable to the Open Internet Order, with a midrange estimated economic impact of negative $8.4 billion. Horney’s estimate showed that the gap between the baseline investment and actual investment was growing. If this trend continues, as is likely, the economic impact of the Open Internet Order will only become greater, in a negative direction, over time. 
It is important that the FCC perform this cost-benefit analysis, because agencies, independent or not, should analyze how new rules will impact innovation, investment, job creation, and economic activity. It is reasonable to question the methodology that an agency uses when assessing the costs and benefits of a regulation. However, if an interested party offers only criticism of an agency proposal to conduct a regulatory CBA, this is likely a signal that the interested party fears that the costs will outweigh the benefits, invalidating its policy position.
Given the persuasive evidence showing a large negative impact on broadband investment, it is likely the Open Internet Order is more costly than beneficial to consumers and entrepreneurs. For this and other reasons addressed at length in our initial and reply comments, the FCC should conduct the proposed cost-benefit analysis. And if the results from the CBA are as we expect, the FCC should repeal the Title II classification of broadband Internet service providers and return to a light-touch regulatory approach.

Monday, September 11, 2017

FCC Eliminates Outdated Regulations

On September 5, 2017, the FCC adopted a Report and Order which updates the rules from the Code of Federal Regulations by removing outdated requirements. Specifically, the FCC eliminated rules from which the Commission has granted unconditional forbearance for all carriers in the 2013 USTelecom Forbearance Orders. The FCC also eliminated references to telegraph service from sections of the Commission’s rules, modernizing regulations to better reflect the current communications market.
This Report and Order is a promising development that removes legacy regulations that serve no purpose in today’s digital economy. Hopefully, the Commission will continue to reduce regulatory burdens that stifle innovation and investment.

Chairman Pai Appoints Members to Advisory Committee on Diversity and Digital Empowerment

On September 8, 2017, FCC Chairman Ajit Pai appointed thirty-one members to serve on the Advisory Committee on Diversity and Digital Empowerment (ACDDE).  The ACDDE will hold its first meeting on September 25 when it will provide recommendations to the FCC on how "to empower disadvantaged communities and accelerate the entry of small businesses, including those owned by women and minorities," and how "to ensure that disadvantaged communities are not denied the wide range of opportunities made possible by next-generation networks."

TracFone's Consumer-Oriented Wireless Proposal

TracFone has a proposal to give consumers enrolled in wireless Lifeline services more choice in using their Lifeline benefit. TracFone proposes that LifeLine providers be permitted to meet the  FCC's minimum service standards through what it calls a "units" plan. Under the proposal, consumers would receive 1,000 units per month. According to the proposal, “A unit would be either one minute of wireless voice service or 1 MB of mobile broadband service.” In other words, the carrier said it "would provide consumers with up to 1,000 minutes of mobile voice service ... or up to 1 GB of mobile broadband data.”

This seems like a sensible way to give Lifeline customers more flexibility to decide how best to meet their own needs, while still maintaining the Commission's minimum service standards.

There doesn't seem to be a good reason to presume that Lifeline customers can't determine themselves how to use the quantity of service available to them under their Lifeline plan.

Saturday, September 02, 2017

Labor Day 2017

Here is one of my favorite quotes from Martin Luther King, Jr., a fitting thought for Labor Day.
If a man is called to be a street sweeper, he should sweep streets even as a Michelangelo painted, or Beethoven composed music or Shakespeare wrote poetry. He should sweep streets so well that all the hosts of heaven and earth will pause to say, ‘Here lived a great street sweeper who did his job well.”
“No work is insignificant. All labor that uplifts humanity has dignity and importance and should be undertaken with painstaking excellence.”
Instead of trying to improve upon Dr. King – which is difficult to do in any event – I am pasting in immediately below my message from last Labor Day. While not new, I don’t think it is out of date. And, of course, the line from Abraham Lincoln to Martin Luther King, Jr., while surely not always straight and true, nevertheless is a line that continues to have meaning with respect to the close relationship between free labor and individual freedom.   

Labor Day: Abraham Lincoln, Free Labor, Freedom and Free Enterprise

By Randolph J. May

On Labor Day – as on many other days – I often find my thoughts turning to Abraham Lincoln’s words. And so it was on this past Labor Day, for Lincoln had much to say that is worth considering concerning “labor” and its relationship to individual freedom and the American free enterprise system.

Lincoln, of course, was America’s first Republican president. But I fear that far too few today know that the party of Lincoln grew out of the antebellum “Free Soil, Free Labor” movement, itself grounded, of course, in the growing antislavery agitation leading up to Lincoln’s election in 1860.

As Seth Cooper, my Free State Foundation colleague, and I showed in our recent book, The Constitutional Foundations of Intellectual Property, Lincoln’s thought concerning “free labor” was grounded largely in his understanding of the meaning of the Declaration of Independence, most particularly the Declaration’s proclamation that all persons are endowed with certain inalienable rights, including “Life, Liberty, and the Pursuit of Happiness.” For Lincoln, this meant, consistent with the Lockean view, that every person possesses a natural right to enjoy the fruits of his or her own labor. As Lincoln put it as early as 1847, “each person is naturally entitled to do as he pleases with himself and the fruits of his labor.”

Or, as Lincoln later put it more colorfully: “I always thought the man that made the corn should eat the corn.”

And here is Lincoln, in his 1859 Address to the Wisconsin State Agricultural Society, eloquently connecting his understanding of “free labor” to the opportunity for individual advancement in the American free enterprise system:

The prudent, penniless beginner in the world, labors for wages awhile, saves a surplus with which to buy tools or land, for himself; then labors on his own account another while, and at length hires another new beginner to help him. This, say its advocates, is free labor – the just and generous, and prosperous system, which opens the way for all – gives hope to all, and energy, and progress, and improvement of condition to all. If any continue through life in the condition of the hired laborer, it is not the fault of the system, but because of either a dependent nature which prefers it, or improvidence, folly, or singular misfortune.

Of course, when Abraham Lincoln uttered all these words, the evil of slavery had yet to be eradicated. And much more needed to be accomplished in the decades after the Civil War to protect the rights of those who had been enslaved to make meaningful the opportunity to reap the benefits of “free labor.”

That said, as we think about Labor Day, I submit it’s certainly worth taking a little time to consider what Lincoln had to say about free labor, freedom, and free enterprise. Like much of what Lincoln said, his words still resonate – and have meaning – in 2016.

PS –  If you are interested in learning more about Lincoln and the Free Labor movement, especially including what Lincoln said about protecting intellectual property rights in the context of a person’s natural right to enjoy the fruits of his or her labor, see Chapter 10 of our book, The Constitutional Foundations of Intellectual Property – A Natural Rights Perspective.